SECTION 25.18. Cancelled Permits

(a) Notice. Within 30 days of cancellation of a permit to sell prepaid funeral benefits, the department shall notify the parties to the contracts sold by the cancelled permit holder of the cancellation. The notice shall provide information regarding the purchaser's options, the Prepaid Funeral Guaranty Fund, and the process for seeking a successor permit holder.

(b) Bid list. The department shall maintain a bid list of entities that wish to:

(1) bid for the right to assume a cancelled trust-funded permit holder's obligations under prepaid funeral contracts and the right to receive the balance of prepaid funeral funds paid or to be paid under those contracts; or

(2) bid for the right to assume a cancelled insurance-funded permit holder's obligations under prepaid funeral contracts; or

(3) bid to provide administrative and record keeping services related to a cancelled permit holder's outstanding prepaid funeral contracts.

(c) Solicitation of bids. On or before the 60th day after the date of cancellation of a permit to sell prepaid funeral benefits, the department shall notify those on the bid list and all permit holders in the vicinity of the cancelled permit holder of the cancellation. If the cancelled permit is trust-funded, the department shall additionally notify all funeral providers in the vicinity of the canceled permit holder of the cancellation. The commissioner shall have the discretion to combine or group contracts for bidding and sale purposes. The notice must include:

(1) the name and address of the cancelled permit holder;

(2) the number and aggregate dollar amount of unperformed prepaid funeral contracts;

(3) the balance of unearned prepaid funeral funds in trust or the value of insurance policies related to unperformed prepaid funeral contracts;

(4) the date by which sealed bid proposals must be submitted to the department to be considered for the bid award;

(5) instructions as to how eligible potential bidders may inspect the cancelled permit holder's prepaid funeral contract records; and

(6) a statement that, with the exception of bids to provide administrative and record keeping services, all successful bidders must have or obtain an appropriate permit to sell prepaid funeral contracts in Texas.

(d) Selection considerations. After the deadline has expired for submitting sealed bids, the commissioner may select a successor to the cancelled permit holder or may select a provider of administration and record keeping services in a situation where no acceptable successor permit holder is found.

(1) If the bidder is a permit holder, the commissioner shall consider:

(A) whether the bidder has demonstrated an ability to properly manage, maintain, and account for its own prepaid funeral funds;

(B) whether the bidder has properly remedied violations of law cited by the department in its examination reports;

(C) whether the bidder has a history of repeated or continuous violations;

(D) whether the bidder has the ability to fulfill the terms of the prepaid funeral contract;

(E) whether the bidder poses any other significant regulatory concern;

(F) the current or potential claim against the Prepaid Funeral Guaranty Fund; and

(G) any other relevant information.

(2) If the bidder is a non-permit holder funeral provider, the commissioner shall consider, to the extent applicable, all of the factors listed in paragraph (1) of this subsection, as applicable, and the following:

(A) the bidder's general reputation in the community where it is located;

(B) whether the bidder's business ability, experience, character, and general fitness warrant the confidence of the public;

(C) any state or federal law enforcement, administrative, or other action taken against the bidder; and

(D) the bidder's willingness to obtain a permit from the commissioner to sell prepaid funeral benefits in the State of Texas and to abide by the statutes and rules governing such permits.

(3) If the bidder is a provider of administration and record keeping services, the commissioner shall consider the following:

(A) the bidder's business experience and knowledge of Chapter 154 of the Finance Code;

(B) the bidder's financial capacity;

(C) the bidder's fee structure and its effect on the Prepaid Funeral Guaranty Fund;

(D) the bidder's general reputation;

(E) whether the bidder's business ability, experience, character, and general fitness warrant the confidence of the public;

(F) any state or federal regulatory or law enforcement, administrative, or other action taken against the bidder; and

(G) any other relevant information.

(e) Selection of successor. The commissioner alone shall be responsible for the selection of a successor permit holder or service provider under this section. However, the commissioner shall make no contract that obligates the Prepaid Funeral Guaranty Fund unless approved by the Guaranty Fund Advisory Council.

(f) Rejection of bids. The commissioner may reject all bid proposals received pursuant to this section.

(1) If all bids for a cancelled trust-funded permit are rejected, a new bid proposal may be solicited or, alternatively, the balance of trust-funded prepaid funeral funds paid or to be paid under the contracts of the cancelled permit holder shall be placed in the Prepaid Funeral Guaranty Fund for management by the Guaranty Fund Advisory Council. The department shall manage the prepaid funeral contracts; provided, however, that the commissioner may thereafter solicit additional bid proposals under subsection (d) of this section.

(2) If all bids for a cancelled insurance-funded permit are rejected, a new bid proposal may be solicited or, alternatively, the department shall manage the prepaid funeral contracts; provided, however, that the commissioner may thereafter solicit additional bid proposals under subsection (d) of this section.

(g) Additional solicitation of bids. The department may from time to time solicit bids on prepaid funeral contracts from a cancelled permit for which no bids were accepted or received as a result of the original or any subsequent bid solicitations.

(h) Employment of persons to assist. The department may, with the approval of the Guaranty Fund Advisory Council, employ persons to assist with the bid solicitation and selection process as needed.

Source Note: The provisions of this §25.18 adopted to be effective November 5, 2009, 34 TexReg 7597